IRS Form 14568-I Guide: Plan Amendment Safe Harbor Rules

1. Introduction: What is Form 14568-I?

IRS Form 14568-I, officially titled Schedule 9 (Form 14568-I) – Model VCP Compliance Statement: Limited Safe Harbor Correction by Plan Amendment, is a specialized compliance schedule issued by the Internal Revenue Service (IRS). It is governed by Employee Plans (EP), an operating division within the IRS Tax Exempt and Government Entities (TE/GE) Division.

This form serves as an attachment to master Form 14568 (Model VCP Compliance Statement) under the IRS Voluntary Correction Program (VCP). It is used specifically by employers and retirement plan administrators who sponsor Section 401(a) qualified plans (such as 401(k) and profit-sharing plans) or Section 403(b) plans to correct four specific operational failures by adopting retroactive plan amendments rather than unwinding past transactions.

2. Purpose of the Form: Why Does Form 14568-I Exist?

Under general IRS correction principles, when an employer fails to follow the terms of its written retirement plan document, the employer must usually correct the error by bringing plan operations back into alignment with the document. Retroactively changing the plan document to match what the employer did wrong is normally prohibited.

However, the IRS recognizes that forcing plan sponsors to undo certain operational errors—such as demanding that employees repay hardship distributions or canceling loans—would create severe financial distress for workers. Form 14568-I exists to provide an authorized “safe harbor” exception for four specific common failures:

• Permitting Retroactive Amendments: It allows employers to retroactively amend their plan documents to match past administrative practice for four specifically approved errors.
• Protecting Participant Benefits: It prevents participants from having their hardship payouts, loans, or early enrollments clawed back or recharacterized as taxable distributions.
• Streamlining IRS Review: Because Form 14568-I utilizes pre-approved IRS model language under Appendix B of the Employee Plans Compliance Resolution System (EPCRS), applications receive faster, standardized review.

3. Who Needs to File This Form?

Form 14568-I is completed by employers, business owners, and plan administrators (known as plan sponsors) who discover that their retirement plan’s day-to-day operations departed from the written plan document in one of four specific ways. You should use this form if:

• Your plan allocated employer contributions or forfeitures based on compensation exceeding the statutory annual limit under Internal Revenue Code Section 401(a)(17).
• Your plan distributed hardship withdrawals to participants when the written plan document did not contain authorizing language for hardship distributions.
• Your plan issued participant loans when the written plan document did not contain loan provisions, or issued more loans than the plan terms allowed.
• Your plan admitted employees into the plan before they met the plan’s minimum age, service, or entry date requirements (early inclusion), and the affected group was predominantly non-highly compensated employees.
• You are submitting a formal Voluntary Correction Program filing via Pay.gov using IRS Form 8950 and master Form 14568.

4. Who Is Exempt / Not Required to File?

Form 14568-I is strictly limited to four specific operational failures. You are exempt or not eligible to use this schedule in the following scenarios:

• Operational Failures Outside the Safe Harbor: If your operational error does not involve Section 401(a)(17) limits, hardship distributions, plan loans, or early inclusion, you cannot use Form 14568-I. You must submit a customized narrative attachment under master Form 14568 instead.
• Document Nonamender Failures: Plans that simply failed to adopt mandatory tax legislation amendments by statutory deadlines must use Form 14568-A (for 403(b) plans) or Form 14568-B (for 401(a) plans).
• Early Entry Involving Principally Owners or Executives: If the employees who entered the plan early were predominantly Highly Compensated Employees (HCEs), the safe harbor amendment method is unavailable.
• Self-Correction Program (SCP) Eligible Errors: Certain insignificant operational errors or situations meeting specific SCP safe harbor amendment criteria may be corrected internally without filing Form 14568-I or paying an IRS user fee.
• Plans Under IRS Examination: If the IRS has notified your business that the retirement plan is under an Employee Plans audit, you cannot use VCP and must resolve errors through the Audit Closing Agreement Program (Audit CAP).

5. When to File: Deadlines and Frequency

Form 14568-I is an event-based submission rather than an annual recurring tax return. You prepare and submit it as soon as compliance audits or third-party administrator reviews reveal that an authorized safe harbor failure occurred.

To qualify for the Voluntary Correction Program, you must submit the application before the IRS contacts your company regarding an audit. Once an examination notice is issued, the VCP safe harbor is no longer available. After the IRS approves the submission and signs the compliance statement, the plan sponsor generally has 150 calendar days from the date of the compliance statement to formally execute the retroactive plan amendments and fund any required corrective employer contributions.

6. Where and How to File

Form 14568-I cannot be submitted on paper for initial filings. It is handled entirely through the federal government’s digital filing portal:

• Pay.gov Electronic Submission: Complete Form 14568-I as an attachment to master Form 14568. Merge these forms, proposed retroactive amendments, and calculation spreadsheets into a single PDF package and upload it via Pay.gov alongside Form 8950 (Application for Voluntary Correction Program).
• Electronic User Fee Payment: The mandatory VCP user fee—which is determined by the total net assets in the retirement plan—must be paid electronically through Pay.gov at the time of submission.
• Supplemental Information: If the assigned IRS Employee Plans specialist requests additional census records or calculations, submit them through secure electronic channels or deliver them to the designated IRS address as per instructions provided by the specialist.

7. Step-by-Step Instructions to Fill Form 14568-I

Form 14568-I is organized into distinct subsections covering the four allowable safe harbor failures. You only complete the specific subsection that applies to your plan. The table below provides an overview of the form’s structure.

Section / Part	Failure Covered	Required Information & Correction Method
Header	Identification	Plan name, Employer Identification Number (EIN), and 3-digit plan number (on every page).
Subsection A	IRC Section 401(a)(17) Failure	Plan years, excess compensation amounts, affected participants, make-whole contribution formulas, and retroactive amendment.
Subsection B	Hardship Distribution Failure	Confirmation that hardship distributions satisfied operational tax rules and retroactive plan amendment adopting hardship provisions.
Subsection C	Plan Loan Failure	Confirmation that loans satisfied Section 72(p) rules and retroactive plan amendment adopting loan provisions.
Subsection D	Early Inclusion of Ineligible Employees	Entry dates, verification that affected participants were predominantly NHCEs, and retroactive amendment adjusting entry criteria.
Section II & III	Controls & Enclosures	Updated administrative procedures narrative and checklist of attached proposed amendments and spreadsheets.

Header: Plan and Employer Information

Enter the complete legal name of the retirement plan, the plan sponsor’s nine-digit Employer Identification Number (EIN), and the three-digit plan number (such as 001). This exact header information must appear at the top of every page of Form 14568-I and all attached exhibits.

Subsection A: Section 401(a)(17) Compensation Limit Failure

Use this section if the plan allocated employer contributions or forfeitures using compensation above the annual statutory cap:

• List the affected plan years, the total dollar amount allocated in excess of the statutory limit, and the number of participants affected.
• Apply the safe harbor correction method: the plan sponsor must make an additional corrective contribution on behalf of each non-affected participant to raise their allocation percentage to match the percentage received by the individual who exceeded the limit.
• Adopt a retroactive amendment adjusting the contribution formula for the failure year to reflect the higher allocation percentage.

Subsection B: Hardship Distribution Failure

Use this section if your plan paid hardship withdrawals to employees even though the plan document did not contain hardship distribution language. You will check the box confirming that the distributions complied operationally with federal hardship regulations (including financial necessity and documentation rules), and attach a retroactive amendment adding hardship distributions to the plan.

Subsection C: Plan Loan Failure

Use this section if the plan issued participant loans when the plan document did not permit loans, or permitted fewer concurrent loans than were actually issued. You will confirm that all loans met statutory requirements under Section 72(p) regarding loan limits and repayment terms, and attach a retroactive amendment adopting compliant loan provisions.

Subsection D: Early Inclusion of Ineligible Employees

Use this section if employees were allowed into the plan before meeting the written eligibility age, service, or entry date requirements. You must confirm that the early-admitted group was predominantly Non-Highly Compensated Employees (NHCEs), and attach a retroactive plan amendment expanding plan eligibility terms to reflect the earlier entry dates.

Sections II and III: Administrative Procedures and Enclosures

Explain the internal changes implemented by your human resources and payroll departments to ensure future operations conform strictly to written plan terms. Attach copies of the proposed corrective plan amendments, participant lists, and contribution calculation worksheets.

8. Required Documents and Information Needed Before Filling

Before preparing Form 14568-I, compile the following employee benefit records:

• The executed plan document, adoption agreements, and all amendments in effect during the years the failures occurred.
• The text of the proposed retroactive corrective plan amendments ready for execution upon IRS approval.
• Detailed payroll records, compensation summaries, and Form W-2 records showing earnings for affected participants.
• Documentation substantiating the operational events, such as signed hardship distribution request forms, loan promissory notes, or employee enrollment cards.
• Employee census data proving that early-admitted workers were predominantly Non-Highly Compensated Employees (if correcting early entry).
• Completed master Form 14568 and Form 8950.
• A signed Form 2848 (Power of Attorney) if legal counsel or a third-party administrator is submitting the filing.

9. Common Mistakes to Avoid

Errors on Form 14568-I can cause the IRS to reject your submission as an invalid model filing. Be sure to avoid these frequent errors:

• Attempting to Correct Other Failures: Form 14568-I cannot be used for any operational failures other than the four designated safe harbor categories. Using it for unapproved errors will lead to immediate IRS follow-up.
• Using Early Inclusion for Owners or Executives: The safe harbor for early inclusion is strictly unavailable if the employees admitted early were predominantly Highly Compensated Employees (HCEs).
• Failing to Fund Section 401(a)(17) Corrective Contributions: You cannot fix a 401(a)(17) violation by taking money away from the executive who exceeded the limit. The employer must make additional cash contributions (plus earnings) to other participants.
• Altering Model Language: The wording in Form 14568-I is pre-approved by the IRS. Striking out or rewriting standard text can cause the IRS to reject the filing as a model submission.
• Failing to Adopt the Amendment Within 150 Days: Receiving an approved compliance statement does not automatically amend your plan. The employer must formally execute and date the retroactive amendment within 150 days of approval.

10. Penalties for Non-Filing or Errors

Failing to correct operational failures before the IRS uncovers them during an audit can have severe consequences for both the employer and employees:

• Plan Disqualification: Operating a plan contrary to its written terms is a qualification defect that can revoke the tax-exempt status of the plan’s trust.
• Taxation of Participant Distributions: Improper hardship withdrawals or loans made without authorizing plan language can be recharacterized as prohibited in-service distributions, triggering immediate income taxes and 10% early withdrawal tax penalties for participants.
• Disallowed Employer Deductions: If the plan is disqualified, the employer may lose business tax deductions taken for company contributions across all open tax years.
• Substantial Audit CAP Sanctions: If the IRS discovers the operational defects during an audit, the employer must negotiate a monetary sanction under Audit CAP, which is significantly more expensive than standard VCP user fees.

11. Related Forms or Schedules

Form 14568-I operates within an interconnected system of retirement plan compliance forms:

• Form 14568: Model VCP Compliance Statement (the master application).
• Form 14568-A: Schedule 1 – Plan Document Failures for 403(b) Plans.
• Form 14568-B: Schedule 2 – Nonamender Failures for 401(a) Plans.
• Form 14568-E: Schedule 5 – Plan Loan Failures.
• Form 8950: Application for Voluntary Correction Program (VCP) Submission.
• Form 8951: Additional User Fee Payment for Open VCP Request.
• Form 5500 / 5500-SF: Annual Return/Report of Employee Benefit Plan.
• Form 2848: Power of Attorney and Declaration of Representative.

12. Frequently Asked Questions (FAQs)

1. Why does the IRS call Form 14568-I a “limited safe harbor” correction?

It is called a limited safe harbor because the IRS normally prohibits employers from fixing operational errors by changing the plan document retroactively. This schedule provides an exclusive, protected exception for only four specific operational mistakes.

2. What are the four failures that can be corrected using Form 14568-I?

The four authorized failures are: (1) allocating contributions based on compensation exceeding Section 401(a)(17) limits, (2) providing hardship distributions without authorizing plan language, (3) issuing plan loans without authorizing plan language, and (4) admitting employees into the plan before they met age, service, or entry date requirements.

3. Do participants have to return their hardship distributions under this correction?

No. That is the primary advantage of Form 14568-I. Instead of demanding that employees repay hardship distributions they legitimately needed, the employer adopts a retroactive plan amendment adding hardship withdrawal language to the plan document.

4. Can an employer use Form 14568-I if an owner was the only person admitted early?

No. The safe harbor amendment method for early inclusion is only permitted if the group of employees admitted early was predominantly composed of Non-Highly Compensated Employees (NHCEs).

5. Can these safe harbor failures ever be corrected without filing Form 14568-I?

Under certain conditions outlined in EPCRS revenue procedures, minor operational failures or specific safe harbor amendments may qualify for internal correction under the Self-Correction Program (SCP) without an IRS filing or user fee. However, if the failure is significant or if the employer desires binding IRS written approval, Form 14568-I under VCP is required.

6. How much is the IRS user fee for submitting Form 14568-I?

The VCP user fee is based on the total net assets held in the retirement plan at the time of submission, typically ranging between $1,500 and $3,500, paid directly through Pay.gov.

13. Conclusion: Key Takeaways

IRS Form 14568-I provides an invaluable, practical compliance remedy for employers sponsoring 401(k), profit-sharing, or 403(b) retirement plans. By utilizing this standardized safe harbor schedule under the Voluntary Correction Program, plan sponsors can retroactively align their plan documents with past operational practices, protect employee savings, and preserve the plan’s tax-qualified status without disrupting participant accounts.

Because preparing corrective plan amendments and verifying non-discrimination testing rules requires specialized ERISA knowledge, plan sponsors should work closely with an experienced benefits attorney, third-party administrator, or qualified pension consultant when preparing Form 14568-I.